Addis Ababa, in Ethiopia, is committing to cleaning up two of the riversides that flow through the city. That might be good, that might be bad – it depends upon how much is to be spent on cleaning up how much. There is actually an optimal level of pollution, or the inverse cleanliness, for a level of economic development. However, there is the one and only correct manner of collecting the benefits of this being done, through land value taxation:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The Addis Ababa, the capital of Ethiopia, on Thursday launches a 29 billion birr (about $1.028 billion) project that aims to develop and rehabilitate two river streams of the city.
The project aims to enhance the well-being of city dwellers by mitigating river flooding and through the creation of public spaces and parks, bicycle paths and walkways along the river sides. The development will run along the two biggest rivers of Addis Ababa stretching 23.8 kilometers and 27.5 kilometers – all the way through the Mountains of Entoto through Akaki River.[/perfectpullquote]
Great, excellent. It really is possible to be too clean though – pollution becomes progressively more expensive to clean up and we can indeed get to the point where leaving some of the dirt while spending on other more urgent matters makes more sense.
But how should the city earn back what is spent?[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Some the major objectives of the project are:
.. – Increase the real estate value of current and future property development alongside the river project. [/perfectpullquote]
The answer is tax that increased real estate value. This is how Hong Kong makes much of its government revenue. It’s how it pays for its metro system too – land values rise around a metro station, so, when building a new metro station pay for it by taxing those rising land values. This is also how the Battersea Tube extension in London is being paid for.
Economics is a general subject, we reach universal answers with it. Thus the answers in those rich world places, HK and London, are the same in a poor world one like Addis Ababa. Tax the rise in real estate values to pay for what it is that raises the real estate values.